Even with a profitable business, sometimes there are insufficient funds to cover the cost of expansion and growth. Luckily, there are loans that are available to help, and one such option is a working capital loan. A working capital loan is leveraged against your business’ working capital, such as cash holdings, assets, and customer debt. They are specifically designed to be short-term loans, and they’re often used for purchasing inventory, temporary employment contracts, or marketing campaigns. But what are the advantages and disadvantages of working capital loans, and how do you know if they’re right for you and your company? Continue reading for your guide to working capital loans.
Advantages
Unlike most traditional loans, there is no need to declare what you’re intending to spend your working capital loan on. That makes is a very flexible option. A working capital loan can also be available on short notice, sometimes within as little as two business days. That’s makes them a handy tool for emergencies or sudden business opportunities that you want to jump on, but couldn’t otherwise finance. When provided by a third-party lender, a working capital loan can offer you non-traditional options for cash-flow management. Most banks will only offer you a fixed schedule for repayment, but with a third-party lender, you can construct your repayment plan around your business’ cash-flow model, which can make it a much easier and more accommodating process.
Disadvantages
When considering a working capital loan in Kennesaw, GA, you should keep in mind that they often demand a higher interest rate to cover the lender’s risk. It may be secured against business assets in order to provide the lender with some protection if a company is unable to repay it. If there is no collateral required, the interest rates will likely be higher. With the added flexibility and fast access also comes a greater expense than with a traditional bank loan.
Whether or not to consider working capital loans in Kennesaw, GA, is a big business decision as with any options when it comes to expanding or growing your business. No loan should be entered into lightly, but the fast cash and adaptability of repayment options could make it an excellent choice.